publication
2025-10-24 14:36
September brought a further increase in consumer inflation in the United States. The official CPI rose at an annual rate of 3%, the fastest pace since January. Despite this, there is a widespread belief in the market that the Federal Reserve will lower interest rates.
In September 2025, US CPI inflation accelerated to 3.0% – reported the government Bureau of Labor Statistics (BLS). The release of this data was delayed for over a week due to the federal government “shutdown.” This is the only statistical information the BLS has released since October 1.
The September inflation reading from the US turned out to be slightly lower than most economists' expectations – the median forecast assumed a reading of 3.1% y/y. September's CPI inflation was estimated slightly lower by the Cleveland Fed's forecasting model, which predicted a result of 2.99% y/y and 0.38% per month.
Relative to August, the consumer price index increased by 0.3% after an increase of 0.4% in August, 0.2% in July and 0.3% in June. Here, both economists and the Fed model assumed a monthly increase of around 0.4%.
September was the third consecutive month of rising CPI inflation in the United States. In August it accelerated to 2.9% compared to 2.7% recorded in July. Not only are these indications increasing, but also However, these readings are still above the Federal Reserve's 2 percent target. TThis has been the state of affairs for 55 months – i.e. since March 2021. In total, this means that the federal target has been exceeded for almost 5 years.
Core inflation – i.e. the price index of consumer goods excluding food, fuel and energy – is also at an elevated level, reaching 3.0% annually. Compared to the previous month, “base” prices increased by 0.2%. In both cases it was a result of 0.1 points. percent lower than the market consensus.
The goal has not been achieved, and we will cut rates anyway
Despite CPI inflation approaching 3% in September, the Federal Reserve returned to loosening monetary policy, cutting interest rates by 25 basis points. The futures market estimates the chances of a 25-point rate cut also at next week's meeting of the Federal Open Market Committee at almost 99% – according to FedWatch Tool calculations. The 25-point cut in December is also valued at 92%.
Jerome Powell made it clear that the fragile situation on the labor market is now more important than increased inflation. For several months now, the US economy has been virtually no longer creating new jobs. The unemployment rate – although still historically very low – is slowly rising. As you can see, the Fed (as well as President Trump) prefers to see higher inflation and lower unemployment rather than the other way around. It is quite probable that today's CPI reading has already 100% “tapped” the October rate reduction at the Fed.
